YOUR MONEY: Data service gives small investors a better deal

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The Independent Online
SMALL investors will soon be able to get up-to-the-minute share prices through a new service that puts them on a par with City stockbrokers.

The service is offered by Electronic Share Information, a Cambridge company whose backers include Herman Hauser, the founder of Acorn Computers. From Thursday, small investors will also be able to deal on the system via a computer tie-up with Sharelink, the telephone-based dealing service.

The price of the basic service, which will list the share prices of all the 4,000 stock market companies, will be pounds 10 a month, which goes to ESI. On top of that, Sharelink's minimum charges are pounds 10 a trade, making deals worth a few hundred pounds economic.

In the past, while City brokers have had prices displayed on their screens, the small investor has been at a disadvantage, having to rely on the following day's newspapers.

Jack Lang, ESI's technical director, said: "We are levelling the playing field to allow small investors to compete on the same terms with the City professionals. Our new service does this for the first time in Europe."

If investors pay for more than the basic service they will also be told immediately about company trading statements, board changes and takeover and merger announcements published on the Stock Exchange's regulatory news service. They will be able to print annual reports and accounts and preliminary results statements the moment they are published.

The system also gives users access to eight years of reports and accounts, allowing them to analyse company performance. In addition, graphs of share price movements over the previous five years can be obtained. ESI is also negotiating with Extel to have its news wire service included in the package.

The Stock Exchange news service information, the database of the reports and accounts, are add-on services to the basic share price information and so they do cost extra. But even here the prices are not too unreasonable. A print of a company report and accounts will cost around pounds 10.

Access to the news wires would be one of the biggest benefits to the investor. These take company news from the Stock Exchange as soon as its published but would be prohibitively expensive for small-scale private investors.

Users will need a personal computer with a modem and an pounds 8 "browser" software package to use the system. ESI says it has elaborate security systems in place to protect users from hackers and to prevent false disclaiming of deals by people who buy shares that subsequently fall in value.

Mr Lang said: "Our biggest fear is that people will trade and try to deny they ever made the deal if the price moves against them. We will keep an audit trail to prove that someone using a particular ID did buy or sell shares."

As for hackers, Mr Lang said that the system ESI has in place is safer than the telephone. Messages are transmitted via a system of codes. "It takes six months to decode a single message," says Mr Lang. "With the telephone there is no way you can be certain who is on the other end of the phone." However, he acknowledged that ESI has had an uphill struggle to overcome the perceived paranoia about security on the Internet.

Subscribers do not have to use the Internet because they can dial directly over standard telephone lines. All you need for this is a personal computer and a modem.

At the moment there are 1,000 users around the world. The service is particularly popular with expatriates who want to keep up with their stock market portfolio.

The system permits the same access to information as if the investor was in Britain.

Mr Lang said his company initially thought the market for the service fell into two distinct categories: so-called "dinkies", aged around 25 to 35, and older "empty nesters", with money and time to spare who learnt from their grown-up children how to use computers. The company also thought it would be a home-based service, with people using PCs.

But in fact a wider range of people use the service. One day recently there were 31,100 price inquiries, mostly during working hours, which, says Mr Lang, suggests that people use office computers for dealing, presumably when their bosses are not looking.

The Internet has the advantage that it is cheap for subscribers to use. There is a monthly fee of pounds 15 and, in addition, the cost of a local phone call. The price is not much more than the normal use of the telephone.

However, the disadvantage with the Internet is that ESI, like any other service supplier on the Internet, is not in control of the system.

There is a possibility that transmission may occasionally slow because local areas of the Internet network are crashing, something that does happen from time to time.

The service is a forerunner of a more ambitious complete market for stocks and shares that ESI is planning to create.

It would in some sense be a competitor to the Alternative Investment Market, carying company listings.

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